Converge ICT Discloses Share Buyback And Complete Exit Of Coherent Cloud

Converge ICT Solutions Inc. (PSE: CNVRG, “Converge ICT” or the “Company”) has approved a share buyback program as part of its objective to increase shareholder value.

Photo Insert: The buyback program, if utilized fully, is expected to increase Return on Equity to shareholders by approximately 1.5 percentage points to approximately 24%.

As part of this buy-back program, the Company has committed to acquire (”Buyback”) up to approximately PHP 6.5 billion from Coherent Cloud Investments (“Coherent Cloud”), an affiliate of Warburg Pincus.

The Buyback approval is concurrent with the announcement by Coherent Cloud that it will launch a placing of 288.7 million shares, representing approximately 3.8% of the company’s outstanding share capital, at a price of PHP 25 per share through an accelerated bookbuild offering (“ABO”). The price of the share buyback will be at the same price as the ABO.

Converge ICT has sufficient unrestricted retained earnings to cover the Buyback. The Buyback will be funded by a drawdown of existing debt facilities. Converge ICT’s financial position after this Buyback remains well within its debt covenants, while CapEx plans continue to remain fully funded through its robust operational cash flow and existing debt facilities, including its recent PHP 10 billion Peso bond

The buyback program, if utilized fully, is expected to increase Return on Equity to shareholders by approximately 1.5 percentage points to approximately 24%.

Dennis Anthony H. Uy, Founder and Chief Executive Officer of Converge ICT, said, “The share buyback highlights the confidence of the founders and management team in Converge ICT’s long-term, sustainable growth potential and value creation as well as the company’s confidence in its continued ability to capture the vast market opportunity."

Upon completion of the ABO and the Buyback, Converge ICT’s public float will increase to over 30%, up from approximately 20% at the time of IPO in 2020. Coherent Cloud will also distribute within 30 days, its remaining shares in Converge ICT to certain parties as part of existing arrangements.

This distribution will also be effected at the same price as the Buyback and ABO, and will include a lock-up on these shares until the end of 2022.

The increase in free float since the IPO has helped Converge ICT to most recently qualify for inclusion into the MSCI indices, which will be effective on 31 May 2022, following the Company’s inclusion into the FTSE Global Equity Index Series (Small-cap), FTSE Renaissance IPO Index, FTSE ASEAN All-Share Index, FTSE ASEAN Star, and the PSE Index over the past year.

Saurabh Agarwal, Managing Director of Warburg Pincus will continue to remain on Converge ICT’s board following the completion of the transactions.

Mr. Agarwal said, “Warburg Pincus invested in Converge ICT several years ago to partner with Dennis and Grace in fulfilling their vision of building a business focused on providing high-speed fixed broadband to millions of unserved and underserved households and businesses across the Philippines. We are extremely proud of what Converge ICT has achieved over the last few years and believe it continues to be well-positioned to accelerate its growth trajectory and further capture a significant share of the market. The Company now has a deep bench of the management team in place and I am confident this is the right step forward for us as well as the Company. Converge ICT will undoubtedly cement its position as the largest high-speed broadband operator in the Philippines."

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